Introduction

What Is General Subsidiary?

General Subsidiary functions as a subsidiary ledger to General Ledger. It is a means by which you can expand any account by any number of segments. It provides a further breakdown of account balance information by allowing a “subsidiary code” to be appended to the account number during transaction processing. This in turn allows you to track various revenue, expense, or asset transactions explicitly. General Subsidiary can substantially reduce the number of accounts in General Ledger by eliminating the need to establish separate account numbers simply to provide an audit trail for various types of activity.

For example, you might want to keep track of costs and income from a particular product or service that you sell. If you have Accounts Payable, when you purchase goods that contribute to the making of that product or service, you can identify the subsidiary code as well as the account number on the invoice line item If you have Accounts Receivable, you can identify the revenues produced by that product or service on the sales invoice line item by supplying the subsidiary code. The sum of all those subsidiary postings can then tell you which of your products or services is the most profitable.

Another example of the use of General Subsidiary might be to identify and collect information on the costs associated with creating a product. These products could be as diverse as the construction of a building, the manufacturing of machines from purchased parts, or the writing and publishing of a book.

Other examples of the use of General Subsidiary might be to track travel and entertainment expenses according to the salesperson incurring the expense, or to record individual equipment or property purchases running through various asset accounts. Yet another use of General Subsidiary might be to keep a log of individual depreciation postings.

How Can a Subsidiary Ledger Be Established?

A subsidiary ledger is established for a specific account by entering a Sub Type of ‘GL’ on the Chart of Accounts record for that account. Then, to categorize transactions for that account, you can identify subsidiary codes in General Subsidiary. Subsequently, when you enter transactions for that account in other applications in the system, you must identify which subsidiary code is to receive the transaction when it is posted. Once posted to the detail and summary files in General Subsidiary, information can be reviewed both by account and by subsidiary code, either in hard copy form or by inquiry. To satisfy both financial and job costing requirements, information is accumulated on a month-to-date, year-todate, and life-to-date basis.

If you do not have Accounts Payable or Accounts Receivable, you can still collect information in General Subsidiary by entering the amounts as Journal Entries in General Ledger. If you have Inventory Control, Order Entry, or Purchase Orders, you can also extract information from these applications. Only General Ledger is required to operate General Subsidiary; all other applications are optional.

When Can a Subsidiary Ledger Be Utilized?

While a subsidiary ledger can be created for any account in General Ledger, it is important to understand that General Subsidiary is designed to maintain transaction detail — not necessarily balance history. As a result, it is possible to select all transactions for a specific account/subsidiary code combination for a specific month and year, and to generate a subtotal for those transactions in General Subsidiary. However, it may not be possible to request a total (or balance) for an account/subsidiary code combination as of the end of a specific month in General Subsidiary; rather, General Ledger is where cumulative monthly balances are kept, for however long you choose.

In other words, a subsidiary ledger is:

a) most appropriate for accounts which require an audit trail of individual postings accumulated according to well-defined categories. Transactions within each category can include year-to-date and life-to-date summaries, and budgeting can be defined at the subsidiary code/account level.

b) not appropriate for accounts which require access to historical monthly totals for each category, either for financial statements or for ratio analysis in General Ledger.